The KBW Bank Index slid 4.5 percent, the most since Dec. 4, to a session low after President Trump said he will nominate long-time supporter and Jerome Powell critic Stephen Moore to the Federal Reserve Board. The index hit its lowest intraday since Jan. 15, with top decliners once again including regional banks Regions Financial Corp., KeyCorp, and Citizens Financial Group. Silicon Valley lender SVB Financial Group was the biggest loser, slumping 9 percent, also the most since early December.
Banks have been hit hard by the Fed’s surprisingly dovish turn this week, with the KBW Bank Index dropping almost 10 percent in the past four days. Bellwether Bank of America Corp. was down as much as 5.2 percent on Friday, the most since Dec. 6, though shares are still up 9 percent so far this year.
JPMorgan Chase & Co. was off by 3.3 percent after closing below its 50-day moving average Thursday, and Goldman Sachs Group Inc. was down 3.5 percent. Citigroup sank 5.4 percent; earlier, the bank was said to have ousted eight equities traders in Hong Kong and suspended three others after a sweeping internal investigation into dealings with some clients.
U.S. 10-year Treasury yields fell another 9 basis points to 2.45 percent Friday morning — down from 3.24% last November.
The preliminary U.S. Manufacturing Purchasing Managers’ Index (PMI) slowed to 52.5 in March, a 21-month low, IHS Markit said. The manufacturing output index fell to the lowest in close to three years.
Earlier, German 10-year Bund yields dropped below zero for the first time in more than two years after German manufacturing contracted further, compounding fears of an economic slowdown across the euro area. In the U.K., Theresa May plans a third vote on her Brexit deal next week.
“Economic data continue to signal slowing global growth,” Citi’s global chief economist Catherine Mann wrote in a note on Thursday. She flagged contracting South Korean exports and China activity that’s unlikely to rebound strongly, along with Brexit uncertainty.
“Dovish central bank guidance has pushed global equities higher in recent weeks, in spite of the weaker global backdrop,” Mann said. “The outcome of the Fed’s March meeting may add fuel to the rally, but there are reasons to be cautious, namely abnormally low volatility and recent equity fund flows.”
(Updates shares; adds chart; Moore nomination to Fed Board .)
©2019 Bloomberg L.P.
The Financial Select Sector SPDR ETF (XLF) was trading at $25.38 per share on Friday afternoon, down $0.68 (-2.61%). Year-to-date, XLF has declined -8.73%, versus a 5.52% rise in the benchmark S&P 500 index during the same period.
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